Judge Slams Company That Retaliated for Negative Online Review

An online gadget company that tried to squeeze a $3,500 "fine" out of a Utah couple as punishment for writing a negative review is in hot water, reports The Salt Lake Tribune.

A federal judge has entered a default judgment against KlearGear, which reported Jon and Jen Palmer to various credit bureaus, negatively impacting their credit rating.

The Layton, Utah, husband and wife were told in May 2012 they had three days to remove a negative review from RipoffReport.com or face the fine. The company sells what it calls geek gear, things like a "Flying Eyeball," "LED Shoe Laces," and "Iron Man Flash Drive."

The company claimed that 2008 negative review violated a purchase clause that it says bars its customers from writing damaging reviews.

The Palmers complained four years earlier about bad customer service after items worth less than $20 never arrived. They told KlearGear there was no such clause in 2008, and even if there had been, it violates the First Amendment.

The company soon after its 2012 demand reported the couple as having failed to pay a $3,500 debt, sinking their credit rating so badly that it delayed a loan for a new automobile, and made them unable to borrow money go buy a new furnace last fall. As the temperatures plunged, the only way to keep their 3-year-old son warm was with multiple blankets, the Tribune says.

The company never responded after the Palmers sued, demanding their credit rating be fixed, and $75,000 in compensation. And, sticking up for free speech, they also demanded KlearGear toss its non-disparagement clause.

U.S. District Judge Dee Benson enter the judgment two weeks ago against the Michigan company.

The company "is liable to the Palmers for defamation, intentional infliction of emotional distress, intentional interference with prospective contractual relations, and violation of the federal Fair Credit Reporting Act," the Tribune said.

The online retail world has lawmakers playing catch-up to protect consumers, especially with the rise of "virtual currency," like Bitcoin.

The U.S. Treasury Department's Bank Secrecy Act Advisory Group is studying the issue.

"There may be situations where we need to choose between innovation and transparency," Treasury's David S. Cohen, the undersecretary for terrorism and financial intelligence, said in March. "Let me be clear: When forced to choose between the two, we will err on the side of transparency."